BlackRock Meets SEC over Spot Bitcoin ETF and Redemption Requirements

BlackRock Meets SEC over Spot Bitcoin ETF and Redemption Requirements

| Updated
by Bhushan Akolkar · 3 min read
BlackRock Meets SEC over Spot Bitcoin ETF and Redemption Requirements
Photo: Depositphotos

In the filing BlackRock proposed In-kind redemptions could also offer tax efficiency, avoiding the need to sell securities for redemptions, which might trigger capital gains taxes.

Representatives from BlackRock and the Nasdaq engaged in discussions with the United States Securities and Exchange Commission (SEC) regarding the proposed rule permitting the listing of a spot Bitcoin (BTC) exchange-traded fund (ETF).

A November 20 SEC memo revealed that BlackRock presented a plan outlining the potential use of either an in-kind or in-cash redemption model for its iShares Bitcoin Trust. The SEC’s response to these models remains undisclosed, leaving uncertainty about the approval of a spot BTC ETF, which has faced numerous delays and rejections. Bloomberg Intelligence’s senior ETF strategist James Seyffart was the first to share the news.

There are indications that the SEC might be nearing a decision, and if approved, it could mark a significant step toward mainstream crypto adoption. Additionally, SEC officials met with Grayscale representatives on Nov. 20 to discuss the company’s pursuit of listing a Bitcoin ETF.

BlackRock CLears Its Stand on Redemption Requirements

As per the filing, BlackRock Inc (NYSE: BLK) also cleared its stand on the redemption requirements, and how would they handle investors willing to exit and redeem their shares.

Currently, redemptions pose a hurdle for approval, with issuers resisting the SEC’s preference for a cash redemption, as explained by Bloomberg Intelligence ETF analyst Eric Balchunas. Furthermore, cash redemption involves the fund company selling investors’ shares and returning the value in cash. BlackRock and Ark, both seeking approval for a spot Bitcoin ETF, are also advocating for in-kind redemption.

In this process, market makers receive Bitcoin in return, later sold for cash. BlackRock highlighted this method in its SEC presentation. In-kind redemptions could also offer tax efficiency, avoiding the need to sell securities for redemptions, which might trigger capital gains taxes. Bloomberg Intelligence ETF analyst James Seyffart described this approach as the “cleanest structure” for issuers and investors.

BlackRock is among several firms, including Fidelity, WisdomTree, Invesco Galaxy, Valkyrie, VanEck, and Bitwise, with pending spot crypto ETF applications awaiting SEC approval. The asset management company submitted its initial application for a spot Bitcoin ETF listing on the Nasdaq stock exchange in June.

Grayscale Files to Update Its ETF Filing

In a filing with the US Securities and Exchange Commission (SEC) on November 22, Grayscale submitted an S-3 form for a spot Bitcoin ETF, aiming to convert GBTC. Bloomberg analyst James Seyffart highlighted significant changes in this amendment compared to the original filing, noting a shortened line related to cash orders and the removal of pages of risk disclosures.

“Looks like they are shortening up this particular filing and telling people they can just view the risk factors in the 10-ks, 8-ks ,and 10-Q’s they already file/filed. No reason to duplicate in the S-3’s i guess?” he said.

The Grayscale filing reads that “the redemptions of shares pursuant to cash orders will only take place if approved by the sponsor in writing, in its sole discretion”.

Bitcoin News, Blockchain News, Cryptocurrency News, Funds & ETFs, Market News
Related Articles